Tuesday, 22 July 2014
Last updated 5 hours ago
Oct 25 2007 | 11:05am ET
Troubled hedge fund Absolute Capital Management dodged another bullet yesterday, making a series of concessions to a group of unhappy investors in an effort in ensure approval of its restructuring plan this weekend.
AbCap said three independent private equity and valuation experts would produce a report on the status of its illiquid holdings. The firm suspended withdrawals from its seven funds last month after the abrupt resignation of founder Florian Homm, who had invested a portion of the funds’ assets in highly-illiquid U.S. pink sheets. The Majorca, Spain-based hedge fund manager is pushing to get approval for a restructuring plan for four of its funds—which will place the illiquid positions into “side pockets” and impose a new one-year lockup—at a shareholder meeting in the Cayman Islands this weekend.
The firm has also agreed to concessions on how it resets its high-water mark for the liquid portions of the restructured funds. Those levels will now be based on the highest of the funds’ valuations on Nov. 1, Dec. 1 and Jan. 1.
“This undertaking is being given in response to investor concerns that the company should not receive a performance fee for the expected rebound in the funds’ portfolio values following the implementation of the restructuring proposals.”
AbCap needs 75% of shareholders to give the OK to its plan this weekend, or the funds in question, which managed about $1.3 billion in July, may be liquidated. Earlier this month, the firm said it had met with about 70% of investors, the overwhelming majority of whom backed the plan. But one shareholder sued, seeking immediate liquidation of two of the funds, and two other sets of investors represented by two different law firms demanded a string of concessions, including increasing the size of permitted redemptions from the fund during its restructuring.
One of the groups, the Absolute Investors Action Group, made up of investors with about $100 million in the four funds, had threatened to vote “no” this weekend, but it was mollified by the firm’s moves.
Meanwhile, today AbCap reopened its German fund, the first of its offerings to begin trading since the troubles began. The firm has replaced the fund’s managers, who resigned earlier this month, with Jens Peters and Antonio Porsia, and will resume calculating net asset value with “immediate effect.”
Investors are expected to yank at least some of their money from the fund, which managed $381 million at the end of August.
AbCap said the fund had just 2% of its assets in illiquid shares, making its resurrection easier than its other offerings. Still, the firm said it is working on reopening its India fund, with the remaining five funds undergoing restructuring.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…